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Cabcharge under fire over industry domination

Reg Kermode, the head of dominant Australian taxi company Cabcharge, will appear before a NSW parliamentary inquiry into his company's monopoly over the industry.

Transcript

QUENTIN DEMPSTER, PRESENTER: The state's taxi industry is now under investigation by three authorities: an Upper House inquiry, an Australian Consumer and Competition Commission court case and Independent Pricing and Regulatory Tribunal review. There have been consistent complaints that the industry is anti-competitive and dominated by one company with monopolistic tendencies, the publicly-listed Cabcharge. That company was founded in 1976 by Reg Kermode, an Australian business success story. The octogenarian is still the chairman and the CEO. IPART was asked by former Premier Nathan Rees to investigate the protection of consumers from monopoly powers in terms of pricing and standards of service. The Upper House inquiry has asked Reg Kermode to appear to answer questions at public sittings next Wednesday. Sarah Dingle has been looking at some of the questions the taxi tycoon is likely to be asked.

SARAH DINGLE, REPORTER: Reg Kermode's company owns a fleet of taxi businesses comprising thousands of cabs. But it's this gadget which has made him his money: the Cabcharge EFTPOS system, which is more than 95 per cent of cabs across Australia. It's that charging system which has earned him a nickname. Mr Kermode has been dubbed Mr 10 per cent.

So what's the flagfall there?

SUUKHI SANDHU, TAXI DRIVER: It's 3.20. That's just a start-off. And then it calculates by time and by distance.

SARAH DINGLE: As our cabby Suukhi Sandhu knows, calculating a taxi fare is a complicated business. At the start of the trip there's a flagfall of $3.20 in urban areas or $3.70 in the regions. Distance charges are $1.98 per kilometre, but that changes after the first 12 kilometres. Waiting time charges apply when your taxi is travelling less than 26 km/h. There's also a booking fee of up to $2.10 and a night-time surcharge of 20 per cent for trips between 10pm and 6am, which in the country also applies on Sundays and public holidays. If you're in Sydney, you also pay tolls. And on top of all that, if you pay using Mr Kermode's Cabcharge card or even one of your own credit cards, the Cabcharge system will charge you an extra 10 per cent of the total - the fare plus the tolls.

PETER ABELSON, SYDNEY UNI: Well the whole system's price gouging in the sense that it bears no relationship to costs.

PETER ABELSON: Certainly in NSW and Sydney, basically all the operators have to tie up to a network, that's a legal requirement, and the networks are fundamentally controlled by Cabcharge or its - CCN Communications is the actual name of the network. They control 60 per cent of the cabs in Sydney and they have very close ties to Premiere and Legion, to 90 per cent of the industries.

SARAH DINGLE: So how much is that 10 per cent earning Cabcharge every year?

PETER ABELSON: Well in Sydney alone, the normal assumption's about 50 per cent of taxi trips are paid by credit and the average trip is about $22, so that's $2 on about 30 million trips. So in Sydney alone Cabcharge'll be getting $60 million in revenue and its costs must be a fraction of that.

SARAH DINGLE: Are passengers angry when they find out?

SUUKHI SANDHU: Yes, they do get very angry sometimes, some of them. And some, they say, like, you know, "Why didn't you warn me?" But, you know, like, we try to warn people, but we think, you know, like, who are not from here, but we just assume that everyone has been living in Sydney just knows about the 10 per cent surcharge.

SARAH DINGLE: But you don't see any of that 10 per cent, do you?

SUUKHI SANDHU: No, I don't. It goes all to Cabcharge.

SARAH DINGLE: Cabcharge also owns and operates cabs. One of Cabcharge's companies is Taxis Combined Service, TCS, which operates the largest fleet in Australia.

Mr Sandhu's taxi today isn't a TCS cab; it's a wheelchair taxi from a different network. Despite this, TCS still earns money from his work via the wheelchair cab booking metre.

Does TCS get money for that?

SUUKHI SANDHU: Yes, they get radio fees which is I think nearly $200 a month.

PETER ABELSON: An operator or a taxi driver should be allowed to have their own communications equipment. There are numerous IT companies that can supply that and the requirement that it has to be supplied by one or two networks is highly anti-competitive.

SARAH DINGLE: The competition commission is currently taking legal action against Cabcharge for anti-competitive behaviour and the state's independent pricing and regulatory tribunal is reviewing whether NSW taxi customers need to be protected from monopoly powers. Those findings and the report of the Upper House inquiry into the taxi industry are all set to be delivered in June.

If he appears at the NSW Upper House inquiry, Mr Kermode is likely to be asked a number of questions. But what customers would probably like to know is how do you justify a 10 per cent surcharge for all Cabcharge and credit card fares and wouldn't the industry benefit from the issuing of more taxi licences and a bit more competition?

The drivers have questions for Mr Kermode as well.

What would you ask the head of Cabcharge if you could?

SUUKHI SANDHU: Like just, you know, bring all these fees (inaudible), you know, so it's, um - or cut 'em all together. You know, like, I think they've already made enough money. And, um, you know, I'm quite sure these machines have paid themselves off, you know, like, hundreds of times over.

SARAH DINGLE: Do you think it's a monopoly?

SUUKHI SANDHU: It definitely is.

On your receipt it's $79.20, that's my fare including the toll charges and that's what I've put, and there's a service fee $7.92. GST on service fee: 79 cents. And so that's the total.

SARAH DINGLE: So we've got the 10 per cent there which is on top of not just the fare but the tolls as well?

SUUKHI SANDHU: Yes.

SARAH DINGLE: So it ends up being almost 10 bucks more?

SUUKHI SANDHU: That's right.

SARAH DINGLE: Mr Kermode is due to appear at the NSW Upper House inquiry next Wednesday. Stateline sought an interview with Mr Kermode, but he declined.